🎤 Expert's voice
Think about shaping the overall financial wellbeing of customers.
Banks and startups can learn valuable lessons from each other
“During the last decade, we've witnessed the birth of thousands of fintechs. Now, banks and payment companies are facing the heat while fintechs are eating their lunch,” says Ritesh Jain, Co-founder of Infynit.
“To become banks of the future, institutions have to go beyond digital and think about how they can apply safety, simplicity, and agility to shape the financial wellbeing of their customers,” he says.
“Incumbents need to focus primarily on their culture, legacy platforms, and services. A key factor will be unbundling their existing capabilities into a set of reusable assets and composable architecture that can compose or recompose into new product offerings with a change in demand, customers, or markets.
Fintechs, on the other hand, are changing the landscape and working as a catalyst for leading banks and financial institutions to unlock their potential by partnering or co-creating and becoming a valued partner in the ecosystem.
Still, they can learn lessons from traditional banks. Fintechs are point solutions, and to become profitable, they need services beyond payments and account services. Technology can help with the credit process, but traditional credit risk and management are still relevant,” he adds.
A variety of tech solutions are driving growth in the fintech industry
According to Ritesh, 2020 saw an increasing interest in regtech, while the development of solutions using AI and machine learning, blockchain, robotics, cloud computing, and API platforms continued to improve and automate financial services.
He says, “The pandemic – an unplanned social experiment – will have a long-lasting impact on financial services and how customers will perceive value in the future.”
Simon Schou, CIO at Copenhagen Fintech notes that data availability and data handling capabilities, for example, high performance computing, AI, and machine learning, were responsible for the biggest growth.
“In the coming year, we expect banks to move towards open finance as they take steps to provide for the overall financial wellbeing of customers,” says Ritesh. “As a result, we will see growth in open banking platforms and solutions. We will also see further growth in contactless payments, blockchain, and credit management solutions, plus a rise in cryptocurrency debit and credit cards,” he says.
Simon believes that AI will continue to transform KYC and AML compliance, and he expects to see rising interest in robust ESG data screening and analysis.
Innovation is a critical factor underpinning fintech
When done well, innovation has the power to improve operational efficiency, reduce costs, enhance brand value, and increase revenue and profitability.
“To me, the definition of winning at innovation is using creativity and new ideas to outcompete and outperform your competitors,” says Simon.
Ritesh explains, ”You need a people-focused culture. This means having a culture of experimentation and organizational agility that leads to creating winning products in an attractive market, targeting profitable customers, and helping customers get the job done.”
He goes on to suggest that systematically measuring the success of innovation is the key to seeing results and outcomes, which helps with resource allocation, accountability, and efficiency. He says, “KPIs can be defined at a high level into input versus output. Some key KPIs to track are:
- R&D spend as a % of revenue
- Number of innovation projects initiated
- Number of new ideas
- Number of resources in R&D (e.g., people, cost)
- Number of new products launched in a timeline
- Growth from new products/services
- ROI of innovation initiatives
- Actual versus projected breakeven of new products (e.g., time, cost)”
Simon adds, “It is also beneficial to track your relative competitiveness compared to your competitors and your capability to be agile in adapting to changing business environments.”
Innovation is challenging for both incumbents and startups but in different ways. Ritesh notes that incumbents are hampered by legacy platforms, culture, and resistance to experimentation. While Simon feels that the biggest blocker is a reduced ability to attract world-class talent and motivate them to develop startup-like solutions.
Ritesh acknowledges that startups, on the other hand, face hurdles in the form of:
- Maintaining culture as the company grows.
- Identifying and customizing global markets.
- Identifying and getting support capital – the right level of advisory and non-executive boards.
- Growth leadership – letting go of control with scaleup.
- Getting good ideas to the market – regulation, trust, and market access.
Simon comments that startups struggle with getting good ideas to the market due to regulation, trust, and market access.
Regulation has a role to play in facilitating fintech innovation
Regulation is a driver of growth and is required to safeguard the interests of consumers and businesses. “Flexible approaches to regulation can support business-led innovation through boosting investment and increasing investors’ trust in new products, services, and business models,” says Ritesh. “It can also support the creation of an ecosystem and competitive marketplace. One of the best examples would be PSD2 – the revised Payment Services Directive.”
Simon points out that another example is the sandbox approach, which is vital for creating a safe environment for innovation in fintech by maintaining the balance between stability and creating the space for trial and error.
💡 Innovation Trends
While solutions in response to the pandemic naturally demanded much of the focus in 2020, the fintech industry didn’t take its eye off the future, and 2021 promises to bring a swathe of innovation. To find out what innovations will be shaping fintech in the year ahead, we asked some of the brightest minds in the industry for their predictions. Here’s what they said.
‘As-a-service’ adoption will accelerate in financial technologies in 2021.
The compound effect of the ‘as-a-service’ trend gives product companies the perfect opportunity to build new experiences and get them in front of customers with unprecedented speed. The stack will continue to be deconstructed into specialized tools across all areas, from compliance and identity verification to payment processing and analytics.
Chief Technology Officer, Pleo
2. Client-first financial products
We will only solve personal financial management for the masses if we truly and fully move away from product- and channel-first thinking to client-first thinking. Therefore, key solutions in 2021 will be those that further break down the barriers between siloed products (saving, investing, pensions, etc.) and channels (self-service vs. advised).
Solutions will need to break down the barriers between siloed products and channels.
Head of Strategy and Partnerships, Nucoro
3. Cryptocurrency on fiat payment rails
Embedding cryptocurrency with fiat payment rails will help crypto become mainstream.
The defining innovation of 2021 will be embedding cryptocurrency with fiat payment rails to seamlessly move money and make crypto adoption mainstream. Building a bridge between crypto and fiat rails will free up locked capital and make money instant, such as instant security settlement or global payments.
Co-Founder at Stealth Fintech Company, Ex Head of Product and Expansion, US at Revolut
4. Digital national currency apps
2021 will be the year of demonstrable benefits and headline-grabbing case studies.
Digital national currency applications – both regulated and unregulated – will continue to reshape the underlying premise of how financial services and payments can be conducted. This is founded on distributed ledger technology, which unifies asset ownership with identity, collapsing clearing and settlement into a single operation.
Chief Growth Officer, Billon Group
5. Outcomes-based student financing
Vetting programs for career results and ROI before financing them will be a growing practice.
Institutions are writing blank checks for education programs without a clear understanding or expectation of career and salary outcomes. With student lending coming under greater scrutiny, I believe there will be a push for private student lenders to take responsibility for assessing outcomes, ultimately leading to better results for students.
CEO, Climb Credit
6. Open banking
Regulation and cutting-edge technologies will have a major impact on the fintech ecosystem.
Regulation is critical in finance and also, therefore, in fintech. Regulatory changes such as PSD2 are having a significant impact on our financial ecosystem, and fintech companies are building the rails to make it work.
Enrique Martinez Hausmann
The impact of blockchain and crypto assets will be greater than the internet.
The ability to offer crypto services to mainstream banks, businesses, and people at large via embedded finance processes will shape the future of fintech. Blockchain technology and crypto assets are changing the landscape radically, and their impact will be bigger than the internet itself.
Yvan De Munck
Director Client Success – Consumer Lending, Informa Financial Intelligence – FBX
8. Remote user ID authentication
Remote user ID authentication via multi-modal biometric technologies will be vital.
As digital banking and neobanking have grown rapidly, the need for remote user ID verification has become crucial. Multi-modal biometric technologies via face liveness detection, voice verification, and video processing are the key.
CEO & Cofounder, PresentID
9. Digital Checking Platform
Digital checks will be the bridge to the future in payments.
B2B payments are stuck in the dark ages, with over 50% still being conducted on paper checks. Digital checks provide a bridge from these legacy payments to the future of faster payments.
10. AI driven screening tools
New data-driven tools will guide sustainable business decisions.
We will see products emerging that build on data to serve new customer demands in terms of impact. For instance, it could be a solution that uses open banking data and cloud-based accountancy data to track carbon footprints in a company's supply chain. These insights could affect the company’s incentive to focus on CO2 neutrality.
Chief Innovation Officer, Copenhagen Fintech
💻 Technology Trends
While 2020 may be considered a watershed moment for fintech, with COVID-19 accelerating digital transformation and digital adoption, a variety of technologies continue to transform the industry. With that in mind, we asked experts from the fintech community to share their predictions on the technology trends that will shape the fintech landscape in the coming year. Here’s what they said.
1. E-commerce enablement
Advances in e-commerce will elevate the status of the fintech industry.
Many trends will impact the fintech landscape in 2021, but I am quite optimistic about everything e-commerce related, such as payments, revenue-based financing, and AR/AP. These trends will create significant leaders in the space, which will effectively make fintech a major industry.
Enrique Martinez Hausmann
2. Decentralized finance
We are approaching a defining moment for decentralized finance (DeFi).
DeFi is an ecosystem of decentralized applications built on top of blockchain. The rise of blockchain technology and cryptocurrencies, i.e., digital assets, will give DeFi its hockey stick moment in 2021. DeFi will democratize access to financial services for anyone, anywhere, with just a smartphone.
Yvan De Munck
Director Client Success – Consumer Lending, Informa Financial Intelligence – FBX
The 60+ generation will cross the tipping point into greater online than offline financial management.
The shift to digital financial relationships accelerated by COVID-19 will stick around now that pre-retirees have become comfortable managing their finances online. Fintechs will expand beyond finances with products that manage lifestyle and health decisions, building trust and meeting the expectations that 60+-year olds had with in-person financial services.
4. Big data
The most significant impact will come from leveraging data.
I see three major trends in 2021. Artificial intelligence and machine learning will have the most significant impact on the fintech landscape, and, related to this, open banking and big data will have an impact. Digital banking will also be trending as we witness a significant change in the way people bank following COVID-19.
Co-founder, Finspire Technology Ltd
5. AI-powered software
AI implementations on both the front and back end will be crucial.
As all customer journeys will be redesigned to be digital-first, AI will be key to automating interactions and accelerating the speed of delivery. This applies to both external and internal customers.
Chief Innovation Officer at Crowdpolicy
6. Open banking
Firms will need to consider how they harness the benefits of open banking.
As early uncertainties about privacy, liability, standards, and user experience are resolved, we will see more firms pulling the trigger on the implementation of open banking. A robust strategy to leverage and monetize Open APIs will be key to retaining or increasing their competitiveness in the post-open banking world.
Senior Manager, Innovation Insights & Emerging Solutions, Interac Corp
7. Strategic collaboration between startups and incumbents
Collaborative synergies will unlock a variety of benefits for fintech companies.
We will see closer strategic partnerships between market-leading fintechs and financial services incumbents. Fintech synergies in AI and open banking, in particular, will fuel next-level customer experiences, reduced operating costs, and big data insights capable of driving product evolution and compliance.
Head of FS Engineering, Opus Una
Fintechs and incumbents will need to take advantage of each other’s strengths.
Instead of competing at arm's length, fintechs and incumbents will be forced to work together more strategically to solve problems faced by their collective customers. Collaboration will be key in 2021, with incumbents leveraging the speed, creativity, and technical savvy of fintechs and fintechs leveraging the reach, brand, and risk mitigation of incumbents.
NAM Lead, D10X Innovation Program, Citi Ventures
8. Social finance
Providers will harness value in the intersection between fintech and social.
Users will begin to have the capability to combine their investments and finances with their community and life events. This shift will start to expand the opportunities to collectively make money and share financial knowledge.
9. Digital transformation
Achieving successful digital transformation will be essential for navigating the pandemic.
COVID-19 was a once-in-a-century event, and in-person, manual processes in banking fly in the face of taming the pandemic. Therefore, digital transformation has become an existential necessity.
10. Smarter fraud detection
Fraud detection will become smarter thanks to advances in AI.
The rise of big data and machine learning has made fraud detection not only more accurate but also faster and more efficient. A huge enabler is the improvement in the explainable machine learning models, which are of primary importance to regulated industries such as financial services.
Innovation Lab Manager, Netguru
📱 CX Trends
In 2020, the pandemic forced a radical shift in customer behavior across all sectors, and with it, significantly amplified the importance of customer experience. As fintech companies navigate the year ahead, customer-centricity will play a key role in remaining competitive. To find out what CX trends will define fintech in 2021, we asked experts from leading companies for their insights. This is what they said.
1. Personalized omnichannel engagement
A one-click experience will allow companies to reduce friction and seamlessly cross-sell products.
It’s very important to provide a holistic CX where you can sign up a customer and simultaneously approve them for different products that they can activate when they want. All products offered by fintechs or banks should provide a blended experience. With the rebundling happening across fintechs, this will unlock engagement.
Co-Founder, Stealth Company (Ex-Head of Product and Expansion – US at Revolut)
Companies will be challenged to perfect a multitude of digital experiences.
With digital touchpoints evolving across web, mobile, voice, PWA, and smart devices, companies will be challenged to deliver personalized and unified experiences across all devices to stay competitive.
VP of Marketing, GraphCMS
2. Data-driven one-on-one relationships
Smart use of data will be key to building strong relationships with customers.
Fintechs get unprecedented amounts of data about their customers, but they must learn how to use it. As PWC says, technology isn’t a final solution; it’s an enabler. The key is to use those data points to build exceptional 1:1 relationships, rather than reducing customers to clicks and numbers.
CEO, Billon Group
3. Product-led CX
Product-led CX will drive more scalable adoption.
In 2021, CX will not be optimized for transactions in the first place but around product-led growth. Freemium models are on the rise, and fintech products will be focusing more on social engagement. Multi-user products make saving and investing more engaging and have built-in organic growth levers.
Chief Commercial Officer, GraphCMS
4. Digital acceleration
We will see mass migration to remote and digital channels.
Digital channels have seen an unprecedented increase in volume in 2020. New segments – that previously hesitated – are now adopting digital channels, creating more opportunities for fintechs to engage.
Manager, Innovation, CIBC
5. Focus on security
Fraud detection will feature more highly given the increase in digital adoption.
With the large increase in online shopping and purchasing due to COVID, fraud detection and prevention platforms will be a key feature and add-on to the online shopping experience.
Host, Be Customer Led
6. Banks going beyond banking
Bank accounts will come to mean much more.
2021 will be the year that customers use banks for more than just banking. Customer-centric challenger banks have always understood the need to develop beyond simply transactional features. Yet, in 2020, we saw an acceleration of embedded features for customers to manage all financial interactions in one place.
Product Manager, Penta
7. Habit-forming CX
Habit loops reinforced by personalized usage and benchmark data will be crucial.
Fintechs need to fight to keep their customers as much as they need to acquire new ones. Smart reminders, cues, and rewards will be the key to keeping customers hooked.
Head of Marketing, Spendesk
Advances in technology will drive speed in key processes.
Insta-finance will dominate in 2021, driven by better data portability and easier-to-use data science tools. With insta-finance, everything slow becomes fast, from onboarding and KYC to debt issuance and dispute resolution.
Senior Manager – Innovation Insights & Emerging Solutions, Interac Corp
9. Embedded sustainability
Sustainability will no longer be the cherry on the cake but the cake itself.
Sustainability, ethics, and values are becoming a customer requirement in all products and services, not just added value. Accordingly, sustainability will be less a unique selling proposition in a product but rather integrated as a feature that customers require in order to use it.
Innovation Manager, Stadtsparkasse Düsseldorf
10. Embedded banking
Brand sentiment will play a greater role in customer decisions.
In 2021, banking will happen anywhere but not necessarily with a bank. People will choose to conduct their banking activities with the brands they like and trust as opposed to traditional financial services providers.
Business Development, Weavr
💸 Digital Banking in Europe
For banks, a strong digital offering is no longer a ‘nice to have,’ it is a strategic imperative, and both fintech startups and incumbents are working hard to deliver outstanding products. In compiling this list, we used a combination of qualitative and quantitative factors and the opinions of our experts to bring you ten of the best digital banking apps in Europe.
Digital bank providing solutions that make up the world’s first global financial superapp
Revolut provides digital banking services to half a million businesses and more than 12 million personal customers. Through its mobile app, customers can exchange, send and receive 27+ currencies instantly with no hidden fees.
HQ Location: London, United Kingdom
Belgian mobile banking leader with a commitment to superior digital customer experience
Belfius has successfully evolved from a traditional bank to a leading digital bank-insurer. The company is dedicated to continuous digital innovation and excellence in user experience. Its mobile app has over a million users.
HQ Location: Brussels, Belgium
3. Intesa Sanpaolo
Winner of ‘Bank of the Year in Western Europe’ at The Banker Awards
Since 2018, Intesa Sanpaolo has pursued a mobile-first digital strategy in retail banking. Now, more than 6 million of its customers actively use its app, which has been recognized by Forrester for its valuable features and strong user experience.
HQ Location: Turin, Italy
Belgian bank-insurer evolving into a digital-first, customer-centric financial institution
In 2017, KBC Group invested €1.5 billion in an innovation and digital transformation program spanning three years. Recently, the bank was rated as the best-performing traditional bank in Belgium by D-Rating, an independent agency that rates digital performance.
HQ Location: Brussels, Belgium
The largest digital-only bank in France by number of customers
A subsidiary of banking group Société Générale, Boursorama is a first-generation online bank founded in 1989. The company has implemented a range of innovative digital features and is the first bank to offer account information via Google Assistant.
HQ Location: Paris, France
Trailblazing Dutch challenger bank available in 30 European markets
Bunq was founded in 2012 by entrepreneur Ali Niknam, who successfully acquired the first European banking permit in over 35 years. The bank is wholly focused on user experience and committed to making a positive social impact through its services.
HQ Location: Amsterdam, Netherlands
Multinational Spanish banking group with over 160 years of heritage
Originally founded in 1857, BBVA is undergoing a huge program of digital transformation. The company is already a global leader in mobile banking, with Forrester recognizing its app for exceptional functionality and user experience three years in a row.
HQ Location: Madrid, Spain
Cutting-edge German neobank that is reimagining banking for the smartphone
Founded in 2013 with the aim of making banking easier for the masses, N26 now has more than 7 million customers and operates in 25 markets around the world. The mobile bank offers services including current accounts and smart money management tools.
HQ Location: Berlin, Germany
Innovative digital banking services for retail and corporate customers
Illimity is a high-tech banking group offering corporate credit, acquisition and management of credit distressed firms, and direct banking for retail and business customers. Founded in 2018, its retail business already serves more than 43,000 customers.
HQ Location: Milan, Italy
One of the largest multinational banks in the world, serving more than 24 million customers
Barclays may be 325 years old, but it continues to push the boundaries of digital innovation. Using open banking-powered API technology, the bank became the first in the UK to enable its customers to bring their other current accounts into its mobile banking app.
HQ Location: London, United Kingdom
💳 Digital Banking in America
Though fintechs continue to push the boundaries of digital innovation, many established financial institutions have taken up the challenge, investing billions of dollars into transformation initiatives. In compiling this list, we used a combination of qualitative and quantitative factors and the opinions of our experts to bring you ten of the best digital banking apps in America.
1. Ally Bank
Digital financial services provider specializing in the automotive industry
Founded in 2009, Ally Bank was named one of the top three fastest-growing banking services in the US by Brand Finance in 2020. Ally Bank serves over 8.5 million customers across a range of services, from online banking and investing to corporate finance.
HQ Location: Detroit, United States
2. Bank of America
Second biggest banking institution in the United States
Bank of America’s heritage stretches back over 240 years, but it continues to prioritize digital innovation. The company currently has around 37 million digital customers and 28 million mobile customers and sees itself as a tech company that just happens to be good at banking.
HQ Location: Charlotte, United States
3. Capital One
Major US bank holding company working to increase access to digital banking services
Since its creation in 1988, Capital One has grown to become one of the largest banks in the United States. In 2020, the company closed 37 of its brick-and-mortar locations as it invested in technology and increased its focus on digitization.
HQ Location: McLean, United States
4. Huntington Bank
Long-standing regional institution aiming to become a digital powerhouse
Huntington Bank has been building the foundations required to become a “people-first, digitally-powered bank” and has released more than 100 digital products since 2018. The company has committed an investment of $150 million to digital innovation in 2021.
HQ Location: Columbus, United States
5. Wells Fargo
Leading US bank underscoring its commitment to digital with organizational restructuring
Despite being founded in 1852, Wells Fargo isn’t neglecting digital transformation. Currently, 43% of its customer base uses online banking, and in 2020, the company announced it was creating a whole new department focused on digital innovation.
HQ Location: San Francisco, United States
America's first digital consumer bank aiming to make banks a force for good
Varo is the first all-mobile bank in the history of the US, receiving a national bank charter from the OCC in June 2020. The bank is working to improve the financial health of millions of Americans who are underserved by traditional banking.
HQ Location: San Francisco, United States
Digital bank leveraging AI to improve customer experience
Launched in 2013, Chime recently celebrated reaching over 5 million customers and has a 35% share of all digital bank checking accounts. The bank offers customers early access to their money, no fees, and a credit-builder credit card.
HQ Location: San Francisco, United States
Banking giant investing heavily in technology and innovation
As the largest bank in the United States, Chase serves half of all US households and has 55 million digitally active customers. The company reportedly invests $11 billion per year in technological innovation, including a focus on AI-driven advances in personalization.
HQ Location: New York, United States
Online-only bank offering simple terms, high rewards, and stellar service
Since it was founded in 1986, Discover has become one of the largest card issuers in the United States. The bank has won a raft of awards, including NerdWallet's Best Savings Account and Best Checking Account Overall in 2020.
HQ Location: Riverwoods, United States
10. PNC Bank
Top US bank leveraging strategic partnerships to enhance its digital offerings
PNC is investing $1.8 billion annually in technology and product development as it works to become a technology company that delivers financial services. It has also formed several partnerships with fintechs, including Ripple and Zelle, to expand its digital capabilities.
HQ Location: Pittsburgh, United States
🎤 Expert’s voice 2
Data is the key to developing customer-centric solutions.
Use design thinking to get close to customer needs
Design thinking and digital product management are at the core of the customer centricity revolution for the insurance industry.
The key factors that have a significant impact on customer experience in fintech products are:
- Simplicity: Financial products and insurance can become very technical and difficult to understand for non-experts. Therefore, simplicity requires a lot of effort and investment.
- Customer-centricity: “You don’t know what you don’t know.” As financial and insurance products are so specific, it is important as a customer to feel that you’re getting a solution that perfectly matches your needs.
- Digital-first: Because financial institutions are so big, they have mostly organized their services with a “physical-first” display. Reorganizing channels around a digital-first – i.e., not digital-only – proposition is game-changing for the industry and for customers.
Professional insurances are diverse and complex. In our design thinking methodology, we spend a fair amount of time setting up focus groups and individual interviews to get insights on what keeps our customers awake at night. Verbatim is used afterward to guide our content and marketing material.
We identify personas for a given profession: for instance, a garage owner can be “Patrick,” a highly skilled young professional that worked in a garage for a few years and decided to create his own business. Or “Pierre,” an experienced entrepreneur managing a small network of garages.
Customers’ needs and solutions vary greatly according to who they are. Technology allows +Simple to identify and cook up the best solutions for each one of these profiles automatically and instantly.
We also have a continuous improvement process that links our customer service team with our developers. As soon as small things in the user experience are identified by the customer service team, small improvements are developed to fix issues and reduce the need for clients to call.
Improve customer experience with data-driven insights
Within insurance, the key components of leveraging data to improve customer experience are:
- Customer knowledge. Data is what makes the difference in being able to tailor offers to the specific needs of clients.
- Risk selection. Cumbersome questionnaires to understand, select, and price risks can be transformed with proper data management, thereby making the onboarding process much simpler.
There are a few related metrics that we use to assess customer experience. The two overarching measures are:
- Conversion rate: Of the potential customers that make initial contact with +Simple, what proportion is converted into clients.
- Churn rate: Of the active clients at the end of a year, how many are still active at the end of the following year.
Embrace technology to develop customer-centered products
Technology is triggering profound changes in the way financial businesses are built and delivered. Those are the trends that have the most impact when working on customer-centered solutions (as opposed to products). Two to watch are AI and machine learning, and robotization.
Financial and insurance products require a lot of data, technical expertise, and analysis. AI and machine learning allow intelligent and industrial data management. These technologies create the opportunity to industrialize tailor-made solutions for customers.
And as processes are automated, the overall cost of operations goes down and economic models migrate from high variable costs to high fixed costs. This is giving the opportunity to both improve UX and bring costs down, improving prices for customers.